Stories from the field

In Mexico, social class is a powerful force that is present in almost every aspect of the Mexican life. Health, education, jobs, housing, financial services, and many other aspects are greatly influenced by the economic class to which one belongs. Class determines the quality and quantity of opportunities available to a person or a family. So as long as there is mobility, the movement of families up and down the economic ladder due to personal efforts and merit, we can say that there is something close to equality of opportunity.

However, in Mexico, classes have remained relatively unchanged over the years; social mobility is not happening as much as we wish it did. Escaping poverty is so difficult that the lower class is practically frozen in its place. Parents with education, money, and connections cultivate in their children habits and skills needed to succeed. Poverty stricken parents cannot pass on to their children what is needed to improve their living condition resulting in the next generation being trapped in the same place.

For this reason, institutions providing services and products to lower classes should take in consideration that in some areas their clients are more vulnerable and need to be educated, so that they can make informed choices about what is being offered to them. If they have been excluded from certain services such as financial ones, then when they are finally given access to them, they need to be educated in them. Financial education, more than regulation and caps on interest rates, will give clients the power to choose between providers and push institutions for better services, higher quality, and lower interest rates.

Microfinance clients in Mexico need to understand concepts and ideas that are essential to these services, but have never been explained to them. Notions such as savings, interests, guarantees, credit bureau, and many others usually do not mean much to them. For example, in Credituyo, the microfinance institution where I work as a Kiva Fellow, women from solidarity lending groups are given a class on how the credit bureau works in Mexico. Most women, if not all, have no idea on how the credit bureau functions, what their score is or how to obtain it. It is not until they receive this very practical explanation that they understand the implications of not paying loans and how they can improve their score. It also works as a motivation tool to encourage them to keep their payments on time so that their score will increase.

"Las Bomberas" group receiving a financial education class on their credit score.

Microfinance institutions also benefit from educating clients. If the institution is transparent about their process and concepts, the clients are more likely to make good choices for their credit history, feel loyal to the institution, compare different products offered in the market, understand the advantages of using credits for their businesses, and they will even be able to tell the institution when a credit official is not being professional, which has been a problem with institutions in Mexico.

Financial education together with quality financial services will increase opportunities for Mexican people so that their merit and hard work will be more of a factor in determining their mobility across the economic ladder. This is only a small step that can be taken by microfinance providers to reduce the big gap that exists between classes in Mexico. More equality will mean more Mexicans achieving the Mexican Dream, that is, more Mexicans being able to have in their country the opportunities offered in developed countries so that they will be able to stay in their land with the people they love.

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